Question

33. In the long run, firms in a monopolistically competitive market structure

a. earn zero economic profit.

b. produce an output level where price = marginal cost.

c. do not produce output at minimum average cost.

d. produce an output level where marginal revenue = marginal cost.

e. a, c, and d are true

34. Externalities

a. never occur when markets are perfectly competitive.

b. are fully reflected in market prices.

c. are reflected in the final price of goods and services.

d. are generally not accounted for in the price of goods and services.

37. Market failure typically occurs for public goods because:

a. political processes generally result in the over-provision of public goods.

b. political processes generally result in the under-provision of public goods.

c. public goods are generally not subject to the exclusion principle.

d. the goods are rival in consumption.

39. Positive externalities

a. lead to too little production at market prices that are too high.

b. are the same as the tragedy of the commons.

c. lead to too much production at market prices that are too low.

d. are both nonrival in consumption and non exclusive once the good is provided.

Answer 1

33) e. a,c and d are true

• Earn zero economic profit.
• Do not produce output at minimum average cost.
• Produce an output level where marginal revenue = marginal cost.

34) d. are generally not accountable for the price of goods and services

37) b. Political processes generally result in the under-provision of public goods.

Market failure occur when there is inefficient distribution of goods and services in the particular free market.

39) d. Are both nonrival in consumption and non exclusive once the good is provided.

The positive externalities nd the public goods are interrelated. The nonrivalrous and nonexcludable are the important characteristics of the positive externalities.